Sov is in with another long writeup - this time, on Polygon’s (Matic) history of grants evolution.

Enjoy the read 👉 https://lobsters.substack.com/p/polygon

imho [ivangbi]: as it comes from the post & also lobsters following Polygon in general since 2018 - it is pretty evident that the focus has always been on NOT focusing and “doing everything at once”. The spray & pray strategy might work so-so in investing (where the power law distribution turns returns into a below-inflation-number) but it worked in this case… probably, because founders haven’t slept in 3+ years. Throughout the entire bear, back when we all got rekt on Binance IEO - Sandeep kept hustling. Doing countless calls and just trying to do everything. Even the grants & the DAO approach don’t seem to organic, and 100 things happen at once. And is just their wei.

Some people take hustling as “dirty” and “not genuine”. I am one of such people, due to my laziness mostly. I dislike empty sales pithces, networking events, and crap like announcing before announcing. And that’s a large portion of Polygon’s success. And many other projects. Polygon have just really outdone it haha. Anyway, everything is a strategy, after all. And after a while, people forget about what was before - and only look at results. And at this point, Polygon has acquired a few things & projects, announced pilots with a bunch of brands (be it due to inherent external interest or paid deals) - which all led to organic traction at this point. Many now, organically, also choose to deploy there.

Do you believe the means justify the end? No one is right, you decide for yourself.

That is not exclusive to Polygon though, as other chains have also seen surge of demand due to multichain future being shilled to us all and tokens being printed. Let’s be honest, it’s mostly the shitcoins and new incentives most of the time. Avalanche, same story. What survives, be it Plasma or Sidechains, Rollups or whatever else Vitalik make up tomorrow (I know he doesn’t code himself, but people DO follow his word) - we shall see. The journey has been quite something for them. Cheers to the workers & builders.

Emergency press conference from J. Powell 🔉 “Fuck your puts, fuck your calls, J Powell has you by the balls”. All credits to https://twitter.com/CarlBMenger/status/1637701519926611969. PS: this is humour, not real… maybe. Don’t get liquidated.

Sup, crabs 🦀

We’ll be undergoing some restructuring here, mkay! Tell your imaginary online friends to follow.

There are many good news channels, many podcasts, many long-read writers… but sometimes you just want that sweet summary of the latest hottest topics. And that’s what we’ll try to do here.

The idea is to infrequently post based on a few categories:

👩‍⚖️ Governance Digest: large protocols’ governance updates and controversial stuff.
🕵️‍♀️ On-chain Sleuth: outstanding MEV, whale transactions, and other on-chain events.
🧠 Long Research: written maybe like once a month, on some random interesting topics.
✍️ Weekly crab notes: summarazing the hottest discussions in lobsterdao, general hot crypto news and crypto twitter larps & drama. Almost like NLW did on Sundays back in the days.

Infrequently. No spam. Please try reading for a week, and we’ll get your opinion after!

​​🧠 [Long Research] Topic: Ordinals & BRC20

Laser-eyed people figured out how to make their own shitcoins... and they are ecstatic! Is the bull here?!

Transactions fees are booming, activity and new startups are growing in numbers, their primary market has revived a bit, and all thanks to... bitcoin shitcoins. You heard that right. Read below for a little overview of what you might be missing 🦞

So… Ordinals.

A few weeks ago, Ordinals took BTC by storm, it was January 2023 when Rodarmor released the Ordinal theory framework. You can read some more here. Fast forward: Ordinals are data blobs inscribed on Bitcoin. Unlike 99.9% of NFTs on Ethereum and alikes, Innoscriptions on BTC exist on-chain rather than being hosted on IPFS or on other solutions.

What's interesting? 🤔 The rise of Ordinals was a surprise, having given a boost to the whole Bitcoin ecosystem. Whether it was the "NFT on Bitcoin" narrative or some other flavour of the month, a fact is a fact - activity, volumes, and huge gas fees! Different wallets, interfaces, data tools, and similar projects - have popped up in the primary market trying to jump on this wave. This has a few interesting things to talk about:

1️⃣ Some core developers, as their primal instincts take over, started to say “this is not how the founding father wanted this!" Nah, for real, they view it as spam and consider making all such activity as literally spam. See here from Luke for a bit more info but ignore the hideous degods picture.
2️⃣ Miners, on the other hand, might not be so upset. They finally get fees, which is a super interesting topic in the security budget debate of the 21M cap. It's an old topic getting especially relevant in the recent cycle, as the current main (financial store of value) use case of Bitcoin doesn't actually entail many peer-to-peer-cash transactions, since people hodl these rocks. As such, fees only have ever come from brrr emissions. Funny ha.

But… the crowd wants more gambling!

Welcome: BRC-20 muh standard. BRC-20 standard was created around 2 months ago as an experimentation for fungible tokens on Bitcoin. Or as a grift. Fast forward: BRC-20 tokens utilize Ordinals innoscriptions of JSON (JavaScript Object Notation) data to deploy token contracts, mint, and transfer tokens. See more from daddy CZ.

What's interesting? 🤔 People familiar with the matter (lol) are mostly of the opinion that BRC-20 is just a dumb concept, even worse than the Colored Coins have been. You could say their downfall has been due to high gas fees, impossibility of composability, distrust of the narrative back then... well, quite a few reasons possible.

There are 14000+ BRC-20 Tokens created as we speak with a total Market Cap of $440 M. (source) - so much scam has been created 💩 trying to sell new garbage to previously unaware holders who might not want to miss the scamcoin & nft season that we had on Ethereum. But

Now, it seems that scamcoins have fallen down quickly, but activity / wallets are trying to do something. So maybe there is something?

💭 Food for Thought:
- The BRC20 Standard adds “useless” on-chain data to satoshis, there’s really not much else to say there? Bad for bitcoin?
- They add “another subset of transactions competing for precious block space and interrupting your ability to secure 1 sat/vbyte transactions to secure your cold storage funds or create a lightning channel”, effectively “polluting" Bitcoin security model?

One and two more decent threads to recap. Again, you can discuss in kingdom or @lobsters_chat. See the conversation start with this message.

💡 Also, keep an open mind. Perhaps the initial failure of Colored Coins was simply due to the wrong timing and not the absolutely flawed architecture & developer experience? Or maybe these BRC20 are also a fake fugazi, but overall it allows Stacks to infiltrate Bitcoiner’s mindset? Looks like Miami is ecstatic. I am sorry, that hyperlink doesn't go to naked gym dudes pictures, it goes to bitcoin week.

​​🧠 [Long Research] Topic: Ledger, HW and Security

Ohayo, have you heard of the Ledge… - OMG STFU 🤬

Hold on; we won’t bore you with just an annoying recap. This post is more of a quick thought-piece for you to consider and maybe calm your nerves. Scroll to “What now?” if you are up-to-date.

Ledger fiasco 1-2-3 🤦‍♀️

A few days ago, Ledger announced the launch of Recover. It allows users who opt-in and subscribe to use it as a backup for their private keys. The service splits the user’s seed phrase into three encrypted shards and sends them to third-party companies… smth like that. Ledger, especially, made statements about their use of the secure element, and 6 months ago they published a post where they said: "A firmware update cannot extract the private keys from the Secure Element".

They pretty much lied to our face again. Morons, truly.

The trouble lies somewhere else - any HWW can have firmware written to extract the seed, as it seems after this charade. The problem is that Ledger is a closed source, so no one can verify that it isn't happening, no matter how much they promise there is no backdoor.

- Trezor is able to do the same thing, but it’s open-source, so you can kinda check it;
- GridPlus is the same as Ledger in this case, but they promised to open-source soon.

It all depends on your threat model. But if we decide to trust our information to Ledger, then it's worth remembering a story about the Ledger data leak that exposed users’ information in 2020 & more…

You already knew they could do it; you just didn’t THINK!

Remember when you were happily downloading new chains’ integrations on Ledger? But some of those previously have not been a part of the old encryption list. So, it was new-new. Well, this wouldn’t have been possible unless this “backdoor” existed. Basically, every developer around the world happily continued installing those updates and didn’t think twice.

What now, any alternatives? 🤔

Don’t update the firmware for as long as you can. When Metamask stops functioning with the older versions… well, seek another extension like Frame and the likes. That’s an option. Here, you kind of have to assume that ledger devs haven’t fucked us yet and didn’t backdoor a firmware before.

Alternatives: Lattice1 and AirGap. Just google them and read more.

TINFOIL ON, THE GOVERNMENT IS WATCHING ME 🪣

Welcome, Gnosis Safe. If you want the ultimate security, go make a safe. Make it 3/5 in case you are afraid to lose the 2/3 keys. You have to believe contracts are safe, but with the amounts they are holding today… we all pray they are. It’s like Saylor, if hacked, it’s all pretty bad from there.

Be careful not fucking yourself, unless you genuinely like DP…

You can go very far with upgrading your security, so my question to you would be - are you sure that you are worth it and that you know what you are doing? If you are not a developer, there is a high chance of you facking yourself over with wrong moves. Are your $$ even large enough?
- If you use a VPN like NordVPN, it’s dumber than no VPN
- If you double-encrypt something, it’s dumb as hell
- If you use your real name in apps, it’s also unsafe

How safe can you go, anon? Well, you aren’t anon after all. Don’t go too tinfoil; it never ends well. But if you must… CIA writes about these things (not the agent, lol) - you can check it out.

More threads 🦞

- https://twitter.com/Mudit__Gupta/status/1659071865762230274
- https://twitter.com/notsofast/status/1658538053219016707
- https://twitter.com/PixSorcerer/status/1658511668853501952
- https://twitter.com/hosseeb/status/1658740433361702913
- https://twitter.com/web3_Phil/status/1658525128928395269

​​🕵️‍♀️ [On-chain Sleuth] Topic: memecoin fomo

Omg it’s all going up! Everyone is making generational wealth except for me…

- I thought the same and spent half a day coping back in April. But it isn't my first rodeo, so: today we look at the most popular meme coins and how much money they really generated for the buyers. Below are some theses and lousy statistics on their performance.

⭕ BRC20: all are in losses.

They started late; they are much less liquid; their total market share was around $450M and is now $250M. And keep in mind that 65% out of that was always attributed to the original BRC20 ORDI, which has been down only. Don’t pay attention to the capitalization numbers etiher, on low volumes they are very manipulative. If you wanna read more on Ordinals and BRC20 taking the Bitcoin ecosystem by surprise, scroll up. Also, lack of wallets, trading tools, trading analytics, and so on - don't let it grow more either.

🔹 ERC20: a better profit-making story, but still pretty bad. See the chart below 📉

It couldn’t include the exact launch pricing in all cases and not all coins, as TradingView doesn’t add all or right away. It’s just a visual representation of the point: unless you got in during the first week(s) before end of April - you are most likely in losses. See Coingecko. The TradingView charts addition was pretty much the peak on May 1, and that's when most people got in actually, huh.

What’s still in money is $ PEPE and $ BEN (made by a presumably anon account), which was endorsed and then taken over by another fraud, BitBoy Ben. And $ PSYOP, created by this anon ben account - where the token was just launched a couple of days ago, but (i) close to 95% of the suppy is still in the hands of that dude who pre-raised > $7M and (ii) not even presalers are unlocked. It’s fraud all around. Quite likely, they both overdid it this time. Even Ran Neuner never did it so relentlessly.

But ser, DeFi coins also went down… What’s the difference? It’s all a scam?

Eh, there is a big difference.

Food for thought 🦞 Narrative trading vs Investing vs Scamming

Surely, any asset has a price - up or down, but always to the right. However, it matters what the underlying narrative and fundamentals actually are. Not for the health of the industry even. You can be as nihilistic as you want, be yourself. Is ok! But if you buy a shitbag, there is 0 guarantee anyone else will buy it. There is no narrative to grasp to, no reason to hold, no better picture of the future.

Buying literal scams means you (i) need to be hella sure you are first, and (ii) you have someone else to dump it on. With investing, although you also sell to someone else later - you get to support builders, something gets created, an ecosystem gets developed. It’s at least somewhat productive. And that productive part, however much it is memed, is relied upon in narratives. Even Verge memes were hanging a lot on the privacy and Pornhub payment acceptance narratives in 2017-2018, whereas Dogecoin spent a part of the cycle relying on Elon and being his go-to-payment coin.

There are different ways to get a narrative going. End of the day, price action defines everything that people believe in. But while you can’t influence the price directly (you can’t magically invent buyers)… you can surely build something decent, interesting and excite people with that. Who knows, maybe you create something cool along the way. But shilling scams to your friends aint it, frens.

You are just coping, loser!

This is not a high horse post. It’s just truly not a sound investment strategy. Unless you have an edge and actual access by beating everyone on time AND you sell the top - it’s not for you. No fomo! PvP will get you buried fast, and it’s not a fun place to be in. This one-month cycle had 3 winners and 10,000 rugs and full losses? Ye, math doesn’t align on that, onto the next narrative 🫡

​​🧠 [Long Research] Topic: Fucking around with keys is a bad idea!

Migrate your seed to another hot wallet: no.
Migrate your keys from ledger to metamask: no.
Fuck around with seed generation: no!

💡 This news piece is not new-new. It's more of a wake-up call, based on recent recent information on how big the numbers were. Stop using unsafe systems if switching costs are so low! Changing a 2FA app or sending a few coins to the a address isn't hard at all…

Remember the GCR tweet from a couple of years ago? It says that even if you hold some of the good assets, a gazillion non-economic attack vectors can mess you up: your mobile phone security is weak, your keys will get lost, your seed phrase sheet will get seen by a random person, etc. There is no need to be a security junkie, but at least don't hold 7 figures in a phone app LoL 😰 like the atomic sers below.

It's not even about wrenches or sophisticated attacks, it's just common sense. For instance, a friend of mine almost lost their seed phrase from their Metamask when the laptop was broken... "I just never took the time to save the phrase after 6 months of daily trading". Another one had a similar situation, despite being knowledgeable about security. It's just negligence; it's not rocket science.

And just yesterday 👀 yet another Profanity thing came to light, unfortunately affecting KP3R, see the post-mortem. An attacker got hold of the governor of a whitelisted job in Keep3rNetwork v1. Tthe governor address was generated via Profanity, making it vulnerable.

Again: fuck around with cryptography, find out. Similar to fucking around with oracles in DeFi.

-> Back to the hack summary of Atomic Wallet
NEW 🔥 more losses were found, reaching $100M . See fresh Tay's thread.

The breach started on June 2, with reports of assets disappearing from users' wallets surfacing on June 3. The largest victim of the hack was on Tron, with 7.95 million USDT stolen, and the total losses amount to $35+ million. The stolen funds were converted into Bitcoin (BTC) and then laundered through a mixer called Sinbad, favored by the North Korean hacker cell Lazarus. Ahhh, it's all Lazarus isn't it…

The exact cause of the hack is still unknown, causing concern for the over a million users who may still be vulnerable. One theory suggests that a malicious update transferred users' private keys to the perpetrator when they opened the app. Atomic Wallet's security has been questioned before, and an audit conducted in 2021 raised concerns. Who says Trust Wallet or any other closed source wallet or extension doesn't suffer the same…

Software wallets, like Atomic Wallet, are considered fundamentally flawed, as they can be compromised easily. These recent incidents highlight the need for better security in the crypto community. To mitigate risks, it is recommended to trust open-source wallets, diversify holdings, and remember the importance of controlling your keys. And not by generating through weird apps! Stay safu, crabs 🦀

For more info:
- Thread by ZachXBT
- Visual & thread by Tay

PS: sumimasen, we were swamped with work for a few days, back to slow writing again.

​​👩‍⚖️ [Quick Digest] Topic: Uniswap V4 🍲

A collection of messages relevant for V4 and some designs thoughts by various devs 👁

This is collected as a stream of consciousness and was not checked for validity per se. A lot of interesting points pop up as things unravel, and there is more to explore. Keep an eye on the chat (as you always must) to figure it out together 🫡

- If custom data and all the cool new stuff is even worth it, if Balancer has already some sort of things similar to that: https://news.1rj.ru/str/lobsters_chat/435438
- Using idle out-of-range liquidity to put $$ into lending protocols, which is likely predefined by a pool/hook: https://news.1rj.ru/str/lobsters_chat/435445. More info here by Dan https://news.1rj.ru/str/lobsters_chat/435462 and here https://news.1rj.ru/str/lobsters_chat/435466.
- More info about hooks and how they are designed to function: https://news.1rj.ru/str/lobsters_chat/435491
- Some JIT stuff by Dan again: https://news.1rj.ru/str/lobsters_chat/435500
- Is not a crocswap copy. The design combines the works of many DEXes and researchers, and actually many of these designs are somewhat closely related anyway: https://news.1rj.ru/str/lobsters_chat/435506
- Some code findings and early thoughts by yAcademy dev: https://news.1rj.ru/str/lobsters_chat/435456
- Some gas logic thoughts: https://news.1rj.ru/str/lobsters_chat/435538
- More comments on the gas situation, namely reentrancy guards: https://news.1rj.ru/str/lobsters_chat/435607
- Some questions by Algebra: https://news.1rj.ru/str/lobsters_chat/435550
- Hayden’s thoughts on how to not have too many users fall prey to scammy hooks: https://news.1rj.ru/str/lobsters_chat/435598
- BSL license is now 3+ years unlike V3’s license which was only 2 years

📹 Hayden’s interview with Bankless: https://www.youtube.com/watch?v=ZmhdNiGOMRU
🧵 Dn Robinson’s thread https://twitter.com/danrobinson/status/1668610793603239938

PS: the author of this summary is dumb and has never even managed to install an npm package. Beware.

​​🕵️‍♀️ [On-chain Sleuth] Topic: CRV Whale & Collaterals 💤

The main topic in the world of DeFi in recent days is a story about the liquidity of the CRV token.

PS: many are fans of Michael as he has been 24/7 in community chats since the early NuCypher days in 2017. Chill, open, and communicative. So this post isn't to beat him into the ground (which isn't even possible) but to discuss the latest things related to CRV collateral. We do like M.C.

0x7a16ff is the source of a significant $188M collateral provided on Aave - all in CRV (!) with an open position involving a $64.2 million USDT borrowing. The current liquidity on all DEXes combined (that disregards off-chain demand, options, and any other not currently bidding on-chain seen amounts) - is not as big, regardless of what DeFiLlama shows: because half of that is cvxCRV and a half of another half is CRV itself (that's how liquidity numbers are counted in DeFi, a 2x). So the real current liquidity on DEXes is about $35M total buy power.

So is the ratio quite alarming, or do people say so?

Gauntlet (known as math brains) is advising Aave DAO to limit the usage of CRV as collateral. Because what happens is the following: CRV goes down -> 0x7a16ff can add more CRV to support HF (health factor) of their position -> etc... but liquidity is finite! As anywhere, unless your name end with “Powell”. A simple solution is to simply disallow new loans based off CRV. Not to punish, but reduce the dominance.

🤔 At the same time, other DAO members of Aave seem to be appalled by this attack on the community member that has violated nothing and just keeps using math as intended: "You have no idea whether he intends to repay the loan. He may be ecstatic to lose 45% of his collateral’s value, as you noted. But on the other hand, he may believe CRV is massively undervalued, and hence would rather borrow against his CRV holdings than sell at these ridiculously low prices. We just don’t know.”

At present, HF for this open position is 1.68 = ok. However, if this rate experiences a decline and falls below the critical threshold of 1.00, an automatic liquidation of the collateral will occur. The current liquidation price of the position is $0.374, and $CRV is trading at $0.64 now. Ok? Idk. “AT LEAST KNOWN 24% of all CRVs are on the founder’s wallets, with one of the most locked tokens today (and only 15% free float available to sell). At current AMM liquidity, you literally cannot get the price down low enough.” - says threadman Adam.

Again though, this post isn't to find someone guilty or blame - the fact is, oracles & collaterals are HARD. Mostly because of how often things change, like liquidity and CMC/FDV. In many cases, you don't even know who the largest LPs are for a token - and if they are connected at all.

To understand the bigger picture CRV stats at the time of publication:
👻 Aave: $188M CRV collateral -> $63M debt in stables
🧙 Abracadabra: $50M CRV collateral -> $20M debt in stables
⚫️ Fraxlend: $35M CRV collateral -> $16M debt in stables
↔️ Inverse: $7M CRV collateral -> $3M debt in stables

Not nothing, right? The worries aren't totally unbased, because $$ went elsewhere.

💡 Don't shit yourself, loser, watch your own NW!

Well, this stuff is actually pretty relevant to DeFi as a whole. Here is why:

1) Due to potential liquidations, CRV might not have enough liquidity as a token -> bad debt to Aave & other lending protocols
2) CRV going down will mean rewards of many stables will massively drop, causing LPs to exit
3) Due to redemptions mechanisms being based off the (low) market liquidity in many cases, shit can spiral
4) That could cause some stables to temporarily depeg, influencing other collateral positions in DeFi

This is not fractional reserve in any way like FTT, no need to compare to that. However, liquidity crunches are a thing. Unintended shit can happen during the turmoils. Stay safu out there, crabs 🦀

​​🧠 [Long Research] Topic: LSD… and LSDfi is tiny 😮

Liquid Staked ETH is being put into every hole... What’s your favorite hole?

1️⃣ Overall size of staked ETH and some context

It's a bit nuanced when it comes to stats on this topic: do you count staking by exchanges in the overall number? Because if you count Coinbase and its cbETH (staking is not siloed within an exchange since there is a derivative) - do you then exclude Huobi which doesn't have a derivative? Yes…

Roughly speaking, the total size of staked ETH itself is 20M ETH or ~$40B worth or ~16% of total ETH supply issued to date. See hildobby's dune and Rated Network's explorer: the latter also shows client diversity, exit queue, and other more sophisticated stats. From that: Lido takes about 33%, followed by Coinbase at 10% and Binance at 5%, with Kraken at 3% each. Anyway, about 30% is undefined, and about 15% is staking pools.

2️⃣ Staked ETH stats via liquid derivative protocols

Back to what matters to us... about a third (or rather 35%) is LSDs or ~20B worth or ~8% of total ETH supply. From those, 75% is Lido; with Rocketpool at 8%, and Frax at 2%. So, Lido is winning by far and majorly, without stopping. So, how much of that is gambling? Meaning, LSDfi?

3️⃣🗞 LSDfi = putting those LSDs work… issue a stablecoin, leverage via ETH, and so on.

So, how many engage in that? Start with this thread. It is incomplete, but anyway, what do you count as LSDfi? Probably, anything that has stETH as collateral or makes yields with the use of that? Then it would even be good dinosaurs like Yearn and Instadapp. As well as Gearbox, Alchemix, and so on. The latest ones people shilled (for no good reason, apart from being more new & fresh) are:

- MakerDAO (wstETH specific collateral) ~$2B
- Lybra (Liquity fork/spoon) ~$190M
- Curve (crvUSD specific collateral) ± $60M see DeFiLlama
- Alchemix (stableocin) ~$25M see DeFiLlama
- Gearbox (leverage) ~$12M for LSDfi specifically
- Instadapp, Indexcoop, Yearn & other known protocols + Raft ($60M), Gravita (Liquity fork), Pendle's product, etc.

💡 A lot of these - are stablecoins. Partly the reason is that ETH borrow rate has been up (as staking becomes less risky and more adopted). As such, making only like 7-10% ETH-yield on leverage is too low, compared to 20%+ before (in Gearbox, Instadapp, and Aave).
💡💡 As you can see, only a tiny % of LSDs are in LSDfi... just about 2% if we exclude MakerDAO? And MakerDAO is about 10% of the LSDs... As such, the amount of people and capital participating in LSDfi is tiny! That could be due to a few reasons:
1. People stake their ETH now because it's extremely safe. They don’t want risk even for an x2 yield?
2. Industry has shrunk, and people are just not chasing. So they don't mind the risk, they are just lazy.

🆕🔥 The new and upcoming ones to also see are Hedgehog (gas & more on-chain derivatives) and Prisma (Liquity spoon, multicollateral). And of course, EigenLayer, which recently launched. But unlike other newer LSDfi, this one seems to be very academia-research related. So will this swing ETH boomers and large stakers to consider, even if they need to validate oracles or some other restaking service? See Vitalik's post.

Interesting things to look at and consider:
A] “In DPoS staking is native, not fugazi TVL” - source. Debate in @lobsters_chat 😉
B] 💭 Being rich is often frowned upon, especially in staking. Because similar to BTC, if a staking pool were to own 50% (even if optically is 2 entities yet managed by 2 close friends) - is “not good”. So, pools could decide to self-limit. As an act of socialism, but in this case it could be justified. This hasn’t happened yet though, and the vote Lido had didn’t think so. But they improve with V2, more than others!
C] The recent Binance report is shallow but useful to send to friends.

That’s it for today! And be careful with what hole you put your staked ETH into 🕳

Contrary to the hentai you are watching, there ARE wrong holes when it comes to staked ETH.

​​Tether could earn more than BlackRock this year…

Ha, baited! Well, it's true though. Ans yes, it's the BlackRock that has $9 trillion in AUM. Tether’s profits surpassed Blackrock’s by 27% in Q1. TLDR 💡 everyone is either too small, or big but dumb & fumbling. Meanwhile, Tether is winning.

​​🧠 [Long Research] Topic: other stablecoins fumbling the bag?

Tether reported $1.48 billion of net profit for the first quarter — more than double its Q4 2022 net profit ($700m). At the same time, BlackRock reported adjusted net income of $1.16bn in the first quarter of 2023 (which is 200 million less than Q4 2022).

Where does the $$ for centralized stablecoin issuers come from?

It comes from treasuries & various lending they engage in. Don't forget, interest rates on USD itself are ~5% now! While YOU use and hold that stable green shitcoin in metaverse, Tether makes real money on you. Keep this in mind for a second, it will be important later.

Tether truthers and USDT reserves

For anyone who says "all their reserves held in BTC, along with it and the profits have increased" - company also said that most of its reserves were held in cash and cash equivalents, with the majority “invested in U.S. Treasury Bills.” Only 1.8% was held in Bitcoin.

BUT! 🚫 Not to sound like tether truthers (who are often right in facts, but wrong in reality) - Tether isn't all that safe. Its profits clearly illustrate that it's NOT 90%+ short-dated treasuries like Circle USDC has. On the contrary, Tether engages in a bunch of private lending, credit, and all other volatile stuff to make money. That is how it can demonstrate abnormal profits, more than if 90% of its reserves were in treasuries. Paolo might say it's all good and safe collateral, but we know how these things can go: creditors, different entities, cascading liquidations, etc.

March exposing the idiots in all of us

During the March crash of USDC, for over 2 days, everyone was in limbo. People were scared, and Circle made no promises or moves to calm anyone down. Mostly because they couldn't do it due to regulatory concerns (and by not having any control over that situation).

Anyway, Circle failed its users. While that's proper behavior, tether always does the opposite: says it's all ok and calms people down. And even though we all pretend to love decentralization and transparency, in times of panic - users appreciated stories and froth... and since then, as a result, USDC token net outflows have surpassed $10 billion since, most of which moved to Tether. USDC supply has fallen from $43B to $27B which is a -37% loss. USDT, on the other hand, went from $70B to $83B, an increase of almost 20% in the same time.

If we talk about the market as a whole, the Total Stablecoins Market Cap is $128.62b. Of which:
- USDT: $83.18b (65.4%) 😟 winning
- USDC: $28.22b (21.9%): fumbling
- DAI: $4.44b (3.4%): fumbling
- BUSD & TUSD: $4.26b & $2.97B: suspicious (!)

I sold a big chunk of USDC at $0.97, put it in treausires, and almost got frozen. GG best trader!

Re-prioritization of stablecoin choices

The March situation and bear market brought out the extremes in people. Some just ignored the non-crypto risks and went into USDT. Some bought LUSD. A bunch of Liquity forks emerged too powered by LSDfi (see the above Crab Notes post). Things got more polarized, basically. The distinction between the “I am a fed” and “destroy banks” got more schizo. And only MakerDAO DAI trying to sit on both chairs at the same time…

While DAI remains the leader in non-fiat stablecoins, its allegiance has been shifting to the centralized side. They are keeping up stETH as a major collateral and trying to fix the USDC PSM, but the Endgame plan fully targets… RWA? That’s something for next time! Stay tuned 👀

Some cool sources on stablecoins:
- https://stablecoins.wtf/
- https://dune.com/steakhouse/stablecoins
- https://dune.com/KARTOD/stablecoins-overview

PS: the pic below doesn't track other chains, whereas Tron has a lot of USDT. So, it's even "worse".

​​🧠 [Long Research] Topic: Stablecoin TAM, RWA poison and The Ever-Dying Ethos 3 parts 😅

Continuing the post above… The assumptions-ideas below are debatable for sure, it's made as food for thought! The decisions teams make depend on where they expect the market and the money to be. The security of the stablecoins due to their backing depends on that directly.

TAM drives stablecoins 💳

Total Addressable Market. The bigger it is, the better it is. Well, usually. Unless you read Zero to One by Thiel who argues that uncrowded small markets are a better starting point. Back to the point. Imagine you want to sell bikinis: you have billions of people being able to buy, but also big competition. However, you can buy ads & traffic to your store -> some % of that lands on it -> some % of that buys = conversion. As such, if your starting market is big, you can get to at least some size. And then it’s competition from thereon, but that’s a topic for another day.

On the other hand, if your market is just 1,000 people… You can maybe only find 100 to speak to, 10 will find the time to actually speak, and only 1 will buy. Sucks, right? Well, that’s crypto products for you. A tiny idustry unless we are talking of General Partner & lawyer bonuses where 1 whale is enough. It isn’t the bull case for stablecoins though, stablecoins want to have network effects (see here).

How is that relevant, ser? Is it even true?

Assumption-statement that stablecoins go by 📐

Stablecoins have strong network effects. The more people use the same stable, the better: it helps exchange value by sending to one another w/o swapping <> this stable has the highest liquidity & depth <> this stable is accepted as a means of payment and salaries in many places <> this stable is listed on many exchanges. These are kinda circular meaning "the rich get richer”.

— Case 1: imagine you are making a stablecoin.

Starting with centralized collaterals is only possible if someone huge stands behind you: you need a ton of trust+money and more than that, a lot of people willing to KYC and issue supply, a bunch of centralized exchanges... you need a ton of resources to just start off basically. It's like starting a bank. To start one, you need to basically be rich already or you can't lift it off.

So, likely not your situation. You need to derive trust from either interesting mechanics, decentralized collaterals, angels, open transparent books, and so on. You need to "become big enough" before users and whales are ok with you fucking around more. As such, anything that's not rich & huge from the start - has to begin as a more decentralized version, naturally speaking.

💡In a bull market, many stables lift off high enough into 9figs ($100M)+ with this approach. Usually, nobody hates projects and stablecoins at this stage of the game. The problems start after.

A perfect example of that is MakerDAO’s DAI in its SAI v1 version which grew "good enough” and then…

​​🧠 2/3

— Case 2: imagine your stablecoin has traction and you want it to grow.

You want the supply to grow, because your relevance & mansion money come from taking a % off that pie.

You look into other non-ETH collaterals. It's WBTC and that's it. Literally, that's it! And what is the competition with stability fees (what protocol makes $$) comparing with other competitors? Wow... You realize, you can't make much money here. You can neither charge more nor can you grow more than X% of the collateral. Why? Take ETH. About 10%+ lost their access, a half doesn't want to ever take any risk at all and simply holds. Another part doesn't want stablecoins but just wants staking. And you end up with MAX possible penetration of low-low double digits at best. That's what the case for SAI and is the case for stables that have multicollaterals (where TAM due to their FDVs & liquidity are 1000x smaller).

This is even before we get into the fact that stability of a $1 peg and depth of the market are not cheap either. You need to pay for that in some way. End of the day, you realize that within crypto assets, you can't grow much if your ambitions are big. Surely, you can wait for $ETH to be $10K+ in which case 10% penetration is fine, but again, your growth is not in your hands = bad. Naturally, you look into other markets…

That's when you discover that "muh gold market and real estate market are x100 bigger and derivatives are x10000 bigger”… Jackpot?!

1️⃣ Fiatcoin-stablecoins & RWA

Enter RWA. Real-World Assets. Or rather, offc-chain assets. Your company equity, factoring), your house equity, gold, debt someone owes you... anything. The TAM of this stuff is literally $trillions of dollars bigger. And in many cases, the user base is prepared to pay good % as fees compared to crypto natives!

Maple, Ondo, Goldfinch, Florence, Centrifuge… there are quite a few RWA related protocols. But when you tell crypto natives that their money goes off-chain... “Gfy bro”, right? So an easier path for them is to (1) either hide those actions behind making a stablecoin (2) ask other stablecoins and lending protocol to print-allow their assets as collaterals. This is already happening, it will happen more, because there is a lot of $$.

See a decent introductory thread: https://twitter.com/jackchong_jc/status/1574745695654797312
And these stats one: https://twitter.com/s0xn1ck/status/1677998728798404611

See this: https://makerburn.com/#/rundown. Holy fuck, right?

DAI is the perfect example of "started with ethos and moving away from it". But aren't we all? It has a token, it wants $$, it must make relevant choices as a business. Ledger - same case somewhat. It's undefeated truth that You Either Die A Hero, Or You Live Long Enough To See Yourself Become The Villain. We don't like seeing it, but money flows dictate how protocols will shape their future. And unless you are a cyberpunk (none of us are, let's be honest), the choice is clear and simple. But then... be careful sitting on both chairs. Aave is also doing this, as an obvious decision.

Mental gymnastics must be an Olympics sport, amiright?

In the post above, we already articulated why so far USDC has fumbled. We also discussed USDT winning and its clear-unclear management of assets backing. Who else is here? There is half-dismantled BUSD from CZ which is lowkey being pressured to fade out, and… TUSD. TUSD was acquired by Justin Sun & Co (not directly, but it all seems close). See a few threads here & here on the recent FUD. There are no clear-clear arguments, but (1) huge unknown growth into x2+ supply (2) related to Justin’s Co (3) pushed via Binance no-fees recently… all seem sus. You decide though.

Apart from USDT, the rest are really fumbling of their own volition. Look at me, Oxford dictionary.

​​🧠 3/3

2️⃣ No-RWA (decentralized) stablecoins

This is the other side of the spectrum. My fellow truck-gun-ranch-BBQ-decentralization-VPN-alienhating mongols. Just kidding. Well, here you have varying degrees of fairy tales being spoonfed to you. Choose what you like:

- decentralized collaterals, no governance, centralized third-party oracle
- decentralized collaterals, active governance, anon team members
- decentralized collaterals, centralized governance, ddoxed team members
- centralized collaterals, active decentralized governance, decentralized oracles

Again, these are not bad! It’s just about what you are afraid of most, because there is no universal medicine. Liquity is like the pinnacle of our achievements so far if RAI-HAI weren’t so design-wise unusable. Then you have a bunch of their forks & spoons which came out recently like Lybra & later Prisma (scroll 2 posts above for a cool LSDfi post). And a bunch of other ice cream flavours which are all based on milk anyway.

3️⃣ Algo jungle yield stables

This goes even deeper. These are not even stables per se, they are stable-pegged assets made for leveraging, looping collaterals, and doing crazy shit. They are not intended or ever been used for payments. They are mathematical fun coins basically. There are a ton of cool things here, but they are basically destined to stay relatively small (while still maybe in $1B size) as they can’t tap into real adoption narratives.

- crvUSD: very cool, very new, but centralized liquidity collaterals (or not? see Michael's reply)
- FRAX: very innovative, very agile, but the question is the purpose now (apart from farming?)
- MIM: was very cool and very risky, now more safe, but same questions apply

Plus all the other stables that have not been mentioned above, ikyk. Again, they are not bad, but they are neither super safe nor are they super regulated. They might like their niche and can spin up other products later, as they have. I bet teams ask themselves the same, And it’s fine! Keep pushing for what you believe in, keep iterating, I am just talking from the user perspective as a stable enthusiast myself. Love you ❤️

Don’t forget, this is all subjective stuff! Feel free to discuss and debate in @lobsters_chat & kingdom.

That’s all for today. Stay sane, stay safu, and don’t sell your stables at $0.97. 🫡

Some cool sources on stablecoins:

- https://defillama.com/stablecoins
- https://stablecoins.wtf/
- https://dune.com/steakhouse/stablecoins
- https://dune.com/KARTOD/stablecoins-overview

​​🧠 [Long Research]: EyeScanner 👁

Sooo, ethCC was fun! Was great to see so many of you, incels, surviving. Will do another post with some thoughts on it, but let’s dive into the hotter topic of this week: worldcoin. There is so much weirdness around it, that it’s a big discussion topic.

Vitalik posted his piece in the same hour as the shitcoin trading began, which is unusual of him, but he likely wanted to get more attention when the hype was at peak. He, as a visionary reptile thinker, likes all new things. Naturally, he wanted to research it and give an opinion:

🔴 Privacy concerns: Worldcoin's reliance on iris scanning raises significant privacy issues, as Buterin pointed out. The database linked to the iris scans could potentially reveal sensitive information, posing a risk to individuals' privacy and security.
🔴 Accessibility issues: Vitalik also raised concerns about accessibility, noting that participants need physical access to a Worldcoin Orb, limiting the project's reach. Without widespread availability of these Orbs, there's a risk of favoring urban centers and creating distribution imbalances.
🔴 Centralization risks: Another point raised by Buterin was the potential for centralization. The inability to verify the integrity of Worldcoin's Orb hardware construction leaves room for backdoors, which could compromise the system's decentralization efforts.
🔴 Security challenges: Buterin identified security risks, including phone hacking, coerced iris scanning, and fraudulent use of identities, all of which could jeopardize the Worldcoin system's integrity. Is a good read: https://vitalik.eth.limo/general/2023/07/24/biometric.html.

👀 But from here, it gets worse…

There is the “tech" and there is the optics & token distribution & marketing. While the tech could be interesting to some extent, the rest is done in a scammy way, resembling MLM pyramids and evil shit. And that can be seen by the observers at orbs and the token metrics they made.

Here are a few clear ways where even tech supporters can't stop themselves from howling:

🤮 Liquid supply is approx 1% whereas investors and team are at about 25%. From the liquid supply today, 3x of the community airdrop size is in the hands of market makers. It's a silly offer worldcoin got into for the sake of some washtrading. Check two good threads here, objective view on the market maker ponzi taking place: https://twitter.com/AriDavidPaul/status/1683627646633013249. Yet you probably can't short though, because MMs hold the supply and can do whatever. Long-term GCR style, this is a disaster of course.

👁‍🗨 Eye scanning is promoted by vendors engaged in MLM. Even the early affiliated videos promoted “we scan eyes of poor people to give them airdrop" type of vibes. See their founding member older post praising poorer nations scanning their eyes. Upon completing the process, a staff member assured me my tokens would unlock soon and hurried off to help a Mandarin-speaking older couple that had stumbled in. - check the DL News article on how some of the experiences are as well. And just look at the video Altman posted himself, dystopian af: https://twitter.com/ivangbi_/status/1684306782078869505/photo/1.

Anyway, some say that this can really push crypto further to adoption, but at what cost? If you want to have adoption no matter the cost, might start throwing money at RWA, scan your eyes, suck off SBF, and do ponzis… Subjective. Pathetic. But decide for yourself!

As a fun note though, some sers made a buttcoin whitepaper version of this: https://twitter.com/OfficialESC/status/1683019497291038722. Who knows, we might see more of this physical-interaction-crap pop up. We love KYC & AML, and it's totally helpful thing, right?!

If you want to continue discussing this stuff, check conversations in lobsterdao first, to not post the same things again. And if you are choosing a movie - check "Minority Report" or “Black Mirror” 🖖 FIN.

​​👩‍⚖️ [Daily Digest] $0.4️⃣ CRV

Have you slept for more than 6 hours today? Well, good luck catching up… There is a chance you are rekt!

First of all, the “Vyper hack”. On Sunday 30 July, several hack attacks drained funds worth about $70 million on Curve Finance. CRV/ETH pool, alETH/ETH pool, msETH/ETH pool, pETH/ETH pool. Details of the hack are in this tweet. Some of the MEV and whitehat operations saved some funds, see the full list by Tay.

And this leads us to the next point… the CRV situation. Funny fact, which everyone always knew, but still LOL: Michael owns about 50% of all CRV circulating and all of that is collateral on lending protocols... Talk about capital efficiency.

📓 we wrote about CRV and Michael’s positions a few weeks ago on June 14 (scroll up). In fact, the topic itself was discussed in Aave for months! Even during Avi fiasco-manipulation back last year… Yet nothing was done, because key players seem to believe that there is no need to force the hand. Well, it was almost forced last night…

With a chunk of CRV over $30M worth getting into hacker’s hands - one gets the question of “what if… cascading liquidations”. For your reference, CRV would need to drop to $0.40 & below. And with three major players having debt: Aave, Abra, and Frax - the question is, who carries the torch. Because it’s quite likely that one would be made whole, but that could evaporate most of the capital on the buy (bid) side for CRV. So it's less about liquidations even (again, Michael already holds 50% of circulating, and that 50% can't be borrowed by others to short) - but it's more about the quality of the collateral and whether the debt will ever be repaid (?)

Anyway. By design (see Sam’s reply in lobsterdao chat), Frax was the first one to force Michael’s hand, as the debt would increasingly get worse and worse. As such, for the next few hours, Michael kept dumping CRV OTC engaged in highly sophisticated OTC deals trying to secure some funds to repay some of the positions.

💡 the terms seem to have been $0.40 and 3-6 months lockup. But the lockup is not anyhow enforced on-chain, as you see via the links and receipts of tokens, no vesting contracts are deployed. Source: etherscan lol. There doesn't seem to be any other off-chain agreements based on the claims of the buyers themselves.

The buyers haven’t been VC funds or some names. In fact, Evgeny of Wintermute skeptically referred to these deals. Saviors of the day, or rather, Michael’s house (note: no, the house is fine) have been:

- 5M CRV ($2M USD) to Tron founder Justin Sun, who already plans to brr yields for his muh RWA protocol (likely putting his own other assets and re-collateralizing them… smh, let’s see how this goes).
- 4.25M CRV to DCFGod
- 3.75M CRV to scammer machi Jeffrey Huang
- 2.5M CRV to crypto investors DWF Labs
- 2.5M CRV to DeFi project Cream Finance
- etc. $11M+ plus. See his debank profile.

It’s a bottom of the barrel mostly, pretty eh. Justin already planning some schemes, although he bought it fair and square, why not… But back when repayments started happening, prices went from $0.50 back to $0.60 - as UK researchers say “not seen in existence since last week” kek.

😮‍💨 Adam and fudzy have been violently expecting fireworks, but some of their points make sense: ok, no cascade now, but where will demand come from for the other CRV part? It’s semi-liquid shitcoin now? Yes and no. It’s quite astonishing how so far it worked out, and there is still $10M+ demand outstanding from even some founder DMs I got willing to buy being a half of that as is. Fascinating, weird, and… almost wholesome. But weird.

⚖️ Some other news: Multichain funds seized by CCP seem to have indeed been seized by CCP. And worldcoin eyes being sold, wow surprise lol… but still allegedly. Stay safu. DeFi is fine. There is no real Black Thursday here for the whole industry. Yes it would be a big event, but likely the holes would be mostly covered. Cheers.

🕵️‍♀️ [On-chain Sleuth] CRV 🛍

Just wow! Demand from the OGs and some protocols is crazy… So far, Mich bagged (and used it all to repay debt) about ~$44M, getting rid of ~110M CRV.

- Dune board: https://dune.com/spotonchain/crv-founder-sold-crv-via-otc
- Mich debank profile: https://debank.com/profile/0x7a16ff8270133f063aab6c9977183d9e72835428/history

NOTE: SpotOnChain tracks USDT only, hence it shows only $22M. But some sent Frax, some sent USDC… As such, if you look at the total CRV sent though, the amount now is $44M USD. There could be some discrepancies, but anyway it gives a roughly accurate picture.

Look at the post we did in June, overall changes are:
👻 Aave: $63M debt in stables -> $20M repaid now -> $43M debt now
🧙 Abracadabra: $20M debt in stables -> $15M repaid now -> $5M debt now
⚫️ Fraxlend: $16M debt in stables -> $8M repaid now -> $9M debt now
↔️ Inverse: $3M debt in stables -> bigger debt now, $9M 👀

Fraxlend design forced his hand first, so the first OTCs went into repaying it. Then he split between Aave and MIM, favouring MIM despite larger debt in Aave. Inverse is now more indebted in CRV, but that doesn’t seem to be a concern now (?)

1️⃣ Whether it was Black Thursday and systemic or not… A game of musical chairs between the protocols?

First of all… There was nothing systemic here. Liquidity would have shifted elsewhere. There was no risk for DeFi (fk u coindesk, larping snakes). 🖕 Liquidations would have happened, some protocols would have lost, but bad debt wouldn’t be so high. Aave would somehow pay it back with reserves or stkAAVE. Meanwhile, Fraxlend showed the strength of its design without even any external votes. MIM understood the situation and ran to save its users with more proactive counter votes. Good! At the end of the day, protocols have to secure their assets and ensure no bad debt, even if it makes churning one main user as a result. That is, if they are not dishonest…

2️⃣ Governance is fugazi or not. How do we fix it?

Immediately, people started blaming governance. Flexibility=control... Should MIM be able to force the hand that fast? They acted in the interest of their users though. What about Aave V2? There are many questions here, because while many say bad debt would have been limited, don’t rush to make bad decisions (Marc) - you can’t argue that it WAS WEIRD how Gauntlet proposals and everyone else have been ignored. Maybe no malice, maybe no conflict of interest per se - sure, but definitely overlooking the situation. And now they want to buy CRV, at least kudos for making it via a treasury vote and not just deciding to buy (on-chain governance benefits). No diss on Aave here, V3 looks great, but one can’t overlook the debt of $60M+ on a medium-tail asset with worsening liquidity and think it’s ok. Blz don't beat me up ❤️

- Also, made a thread on governance: https://threadreaderapp.com/thread/1687087857859719168.html
- A thread on different models tradeoffs: https://twitter.com/apeir99n/status/1687095911024136192

3️⃣ Founders are evil and rich? Is Mich an evil abuser lol?

Mich didn’t want to sell (majority in any case) and had put them as collateral instead. Now he is forced to sell lower, which one could say was a sifu move - but Mich built much more for the space than the trading shady fker. It might have been an oversight from our in-house-physicist, but it is what it is. Currently, he is taking an L compared to if he sold it before - and that is a fact.

But again: There was nothing systemic here. DeFi is not dead 🤕 Liquidity would have shifted elsewhere. Balancer has bribes. Uniswap has liquidity. Everything was ok from the start if you accept the fall of some and the rise of others. It’s cool to see some OGs come to the rescue, but again - that is NOT an industry rescue, it’s a rescue of their favorite. A choice, not a necessity.

PS: love both Curve and Aave, no diss on either. Simply presenting different sides to the debate. Cheers 🖖

👩‍⚖️ [Quick Digest] Are you doing it all wrong? For founders & teams.

GM! As bear continues and all user metrics fall, it's hard to keep yourself both motivated and convinced. User metrics down, governance activity down, volumes down, your bonuses down, your industry prospectives down - it's all falling… Is it fine?!

We often hear: Devs, do something! - but if we get asked “what would you do in our place?” - we immediately understand that we are wrong. Sometimes a dev can’t do anything, or rather, a dev is already doing everything. You are just asking for oranges from an apple tree.

💡 And the decision-making cycle here is different from the one of an investor.

For investors, you are supposed to max bid at the bottom. Basically to spend more in bear than in bull. That’s your max opportunity period when you consider ventures investing vs value investing. For teams, it’s often the opposite. Teams are more like value investing cycles, even if their VCs force them to gamble with their lives. Teams’ max opportunity window is staying alive to hit the critical point, whereas timing the bear isn’t actually that important. Or is it?

Anyway, check out https://threadreaderapp.com/thread/1693165661361692778.html 🦞 And GLHF PnD-ing your friends on a weekend, let’s see how long it survives.

Did a looong SEND IT podcast with amplice on all things DeFi and mostly about @GearboxProtocol journey: from 0xmikko coding weird shit, to forcing me into wagecucking, to V1 DAO... and now V3. Thanks for having us 💕 @leviathan_news, DAdvisor, Wajahat, and Samuel 🤖

PS: I never said I am a genius, Sam did me dirty in this clip, lawsuit inc mfka.

🎞 https://youtu.be/BwdHKnFTScU

DId a looooong one with Alp and Jack from Defiant back in Istanbul. We went through a lot of things on lobsterdao ethics and alignmeeeent - to different things like wallets and adoption mental gymnastics - to Gearbox vision and DeFi. Check it out! It has timestamps, so you can click around.

📹 https://youtu.be/5m2lzTj-PVk?si=OqU97i-wL7RZN2qa
CT: https://x.com/DefiantNews/status/1730588429006627056

PS: my face looks like a hamster, was already getting sick and swollen, I swear I don’t eat that much.

We did a deeeeeep interview about EigenLayer on Defiant News with Alp, and chads Tina & Teddy 🔥 Basically a one hour panel on restaking security implications, AVS use cases, product viability, and some DA stuff... Watch it! youtu.be/xev-eZEWCnA

PS: ivangbi and alp started doing these bi-weekly deep dives on different hot topics on Defiant. The idea is to not just suck up to founders and let them shill, but to try grilling them and asking genuine questions which a token holder / researcher would have. For example, in this episode we tried to distill the fancy AVS narrative to early-infra-shitcoins launch platform. That doesn’t anyhow diminish the research and the technology, but helps view things in a more friendly way. Hopefully it’s interesting, enjoy!